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Executive Briefing

Why an SEC whistle-blower award may spell trouble for employers; trends that will transform the way people work.

#Dori Meinert

By Dori MeinertDec 1, 2014

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The U.S. Securities and Exchange Commission (SEC) recently awarded $30 million to a foreign whistle-blower, the highest whistle-blower award to date and more than double the amount of any previous award. While that has attracted plenty of attention, a smaller, $300,000 award may prove even more worrisome for companies.

For the first time, the SEC issued an award to someone who is paid by his or her own company to root out misconduct. The whistle-blower performed internal audit and compliance work.

“Employers should be concerned because people with internal and compliance functions do not work for the SEC. They work for the company,” says attorney Lou R. Mejia, a partner with Perkins Coie LLP in Washington, D.C., who represents public companies and others before the SEC. “Part of their responsibility is to help the company resolve issues when they are raised.”

The SEC action may drive a wedge between management and employees with compliance functions, Mejia argues. He worries that, instead of exploring issues in more detail or trying to understand the company’s position, employees responsible for internal audits and compliance “will simply go to the SEC because that’s where they can get a big payday.”

Sean McKessy, chief of the SEC’s Office of the Whistleblower, says individuals who perform internal audit, compliance and legal functions for companies are on the front lines in the battle against fraud and corruption.

“They often are privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one,” he said in a written statement.

In this case, the whistle-blower, who wasn’t identified by the SEC, reported concerns of wrongdoing to appropriate people within the company, including a supervisor, and only went to the SEC when the company failed to take action after four months. The information provided by the whistle-blower led directly to an SEC enforcement action, according to an SEC announcement.

The SEC offers whistle-blowers up to 30 percent when sanctions exceed $1 million.

The message for employers?

“They need to take any reports from internal audit and compliance seriously, and they need to thoroughly investigate the issue and make sure the employee is satisfied with the conclusion reached by the company,” Mejia says.

What Will Transform the Way People Work?

Here’s what 10,000 workers in China, Germany, India, the United Kingdom and the U.S. had to say about which factors will transform work over the next five to 10 years: